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Goodwill and Impairment

About the project

Goodwill is an asset recognised on an acquirer’s balance sheet in a business combination when the consideration paid for an acquiree exceeds the fair value of the acquiree’s identifiable net assets. It is measured as a residual (the excess of the amount paid over the fair value of the identifiable net assets), and represents the future economic benefits arising from other assets acquired that are not individually identified and separately recognised. Goodwill is subsequently measured at historical cost and tested for impairment on an annual basis and whenever impairment indicators are present. For the purposes of impairment testing, goodwill is allocated to the acquirer’s cash-generating units (ie to each group of assets that generates independent cash flows) that are expected to benefit from the acquisition.  
Following its Post-implementation Review of IFRS 3 Business Combinations, the International Accounting Standards Board (IASB) began a research project on goodwill and impairment with the objective to explore whether entities can provide users of the financial statements with more useful information regarding acquisitions at a reasonable cost. The IASB is considering:

  • improving disclosures to allow investors to assess whether a business combination is a good investment decision and whether, post-acquisition, the business is performing as expected at the time of acquisition;
  • simplifying the accounting for goodwill; and
  • improving the calculation of value in use in the impairment test.

As a next step, the IASB expects to publish its preliminary views in a Discussion Paper in early 2020 and seek public comments.

The US Financial Accounting Standards Board (FASB) has also concurrently been carrying out a project on the subsequent accounting for goodwill under US GAAP.
The HKICPA is actively engaged in its own goodwill and impairment project, and is carrying out various activities to drive local and global discussions on the accounting for goodwill, for example:

  • The Institute is working closely and exchanging ideas with other national standard-setters, including a joint research project with the staff of the Accounting Standards Board of Japan (ASBJ).
  • The Institute presented and facilitated a discussion at the International Forum of Accounting Standard-Setters meeting in October 2019 on the nature of goodwill and its subsequent accounting.
  • The Institute has been conducting various other forms of outreach to solicit views from stakeholders, including a forum with local investors and analysts.


Upcoming activities

The HKICPA is planning to publish a research paper on goodwill and present its research to the IASB and national standard setters in early 2020 to coincide with the IASB’s discussion paper. 


Other useful resources

IASB Goodwill and Impairment project page

FASB Goodwill project page




Last updated: 23 January 2020